When our judgments drift us to dangerous shores - The anchoring effect in legal decision-making

„We should not moor a ship with one anchor or our life with one hope.” (Epictetus, Greek philosopher)

For those familiar with the phenomenon of heuristics, it does not break ground that legal decision-makers (judges and jurors) are only human observers confined by the boundaries of human cognition. One prevalent bias in legal decision-making stems from the so-called anchoring-and-adjustment heuristic, which might lead to severe consequences when sentencing by the judges or making settlement proposals by the litigation lawyers.

Anchoring-and-adjustment heuristic refers to assimilating a numeric estimate toward a previously considered standard. In their classic study, Tversky and Kahneman asked participants comparative and absolute consecutive questions about the percentage of African nations in the United Nations. In the comparative question, participants indicated whether the percentage of African nations in the U.N. was higher or lower than an arbitrary number (the so-called ‘anchor’): either 65 or 10. Then, the researchers asked the participants to give their best estimate of the actual percentage in absolute value. The results showed that the absolute judgments of the participants assimilated to the earlier provided anchor value, so the mean estimate of African nations in the U.N. among participants who received the high anchor previously was 45%, compared to 25% for participants receiving the low anchor previously.

Since Tversky and Kahneman’s classic study, the effect of an anchoring-and-adjustment heuristic has been demonstrated in various domains of judgment and decision making and was found to be a robust and persistent psychological effect. When people make numerical estimates (for instance, estimating the fair market value of a house or any other goods), they commonly rely on the initial value available to them. It is noteworthy that such reliance on an anchor is entirely reasonable in many situations when the anchor conveys relevant information about the actual value; however, the problem is that

even when people conclude that an anchor provides no helpful information,

the anchor still makes people adjust their numeric estimations

upward or downward to that anchor.

The relevant scientific evidence also suggests that

the dominant effect of anchoring works

even if the anchor is

ridiculously and unreasonably high or low.

As we can expect, judges as human beings have also been proven to be affected by anchors in their judicial decisions. Legal scholars have long thought anchors influence jurors, and researchers have found that plaintiffs’ lawyers’ damage requests influence the jurors’ assessments of the proper amount of damages to award; when the plaintiffs’ attorney asked for more money, the jurors awarded more.

In their famous series of studies, Guthrie et al. (2000) replaced the jurors with judges and tested that seemingly reasonable presumption that judges will be immune from anchoring effects due to their experience that might mitigate the influence of arbitrary anchors:

The researchers recruited 167 federal magistrate judges to participate in their study and asked them to complete a questionnaire designed to assess common cognitive illusions on judicial decision-making, such as the anchoring effect. To test whether the anchoring effects influence judges’ damage assessments, the researchers described a severe personal injury suit in which only the amount of the damages was at issue. The plaintiff requested damages for lost wages, hospitalization, pain, and suffering but did not specify the amount.

The judges were randomly assigned to either a ‘No Anchor’ condition or an ‘Anchor’ condition. In the ‘No Anchor’ group, the judges were asked, “how much would they award the plaintiff in compensatory damages?”. In the ‘Anchor’ group, the judges were provided with additional information: the defendant of the lawsuit requested the dismissal of the case on the ground that the case does not meet the jurisdictional minimum for a diversity case USD 75,000. The judges in this group were asked to first rule on such a motion of the defendant. They then were asked if “they denied the motion, how much would they award the plaintiff in compensatory damages?” Since the plaintiff, based on the description of the case, clearly had incurred damages greater than USD 75,000, the defendant’s motion was entirely meritless. However, the researchers hypothesized that such numeric value would serve as an anchor resulting in lower damage awards by the judges in the ‘Anchor’ group.

The study results demonstrated that ruling on the motion in the ‘Anchor’ group had a robust effect on damage awards:

The 66 judges in the ‘No Anchor’ group awarded an average of USD 1,249,000, whereas

the 50 judges in the ‘Anchor’ group awarded an average of USD 882,000.

Only 2 of the judges in the ‘Anchor’ group granted the defendant’s motion to dismiss the case, indicating that the anchor value (USD 75,000) conveyed no reliable or relevant information regarding the amount of the plaintiff’s damage. In conclusion, requesting the judges rule on this entirely unreasonable motion depressed average damage awards by more than USD 350,000.

It is noteworthy that settlement talks in litigation also frequently produce anchors, and litigants can easily be influenced by the opening proposals made by their adversaries. In another famous study by Korobkin and Guthrie,

people evaluating settlement offers were more likely to accept a USD 12,000 final settlement amount when it followed a USD 2,000 opening proposal compared to the scenario where the final settlement amount followed a USD 10,000 opening proposal.

To conclude, the above studies demonstrate how easily anchors can sneak into the process and affect how judges and lawyers think about damage awards, suggesting a severe source of error in civil lawsuits. Research suggests that judges, and other professionals in the legal field use heuristic thinking in judicial processes and decisions, although not all of them may be aware of such use.

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Cheat sheet for busy lawyers

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Inside the judicial mind

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